Original Author: Christina Comben (Cointelegraph Contributor, Magazine, September 4, 2026)

Original Translation: Deep Tide TechFlow

Deep Tide Introduction: Crypto projects are pouring hundreds of millions of dollars into "buying back their tokens." Since 2026, the buyback scale has reached about $640 million, a year-on-year increase of about 17%, with Hyperliquid and Pump.fun consuming nearly 90% of that.

On the surface, buybacks (and burns) can create demand, shrink supply, and support token prices, while also giving holders a more direct sense of "the protocol is making money"; but on the flip side, every dollar used to buy tokens cannot be used to hire developers, expand business, or strengthen the balance sheet.

This article highlights viewpoints from 1inch, Bitwise, and Spark: buybacks can support the token economy, but do not necessarily improve the underlying business, nor save protocols that are inherently unsustainable. As tokens increasingly resemble stocks and regulators begin to question "where the value actually comes from," the real question may be: if the buybacks stop, do you still have a reason to hold this token?

Crypto projects are spending hundreds of millions of dollars to buy back their tokens. But do buybacks really create enduring value, or do they merely make tokens appear more valuable than they actually are?

As the industry matures and increasingly borrows practices from traditional finance (TradiFi), crypto projects have started mimicking the behaviors of listed companies. The latest trend shaking the crypto circle is token buybacks: using revenue to buy back their own tokens.

As of 2026, crypto projects have spent about $640 million on this, up about 17% year-on-year, and significantly more than the mere $366,000 in 2024. Among them, Hyperliquid and Pump.fun have accounted for nearly 90% of current expenditures.

So where did this sudden surge come from?

Buybacks can create demand for tokens, while burns can reduce supply and increase the value of each token. This dynamic can create upward pressure on token prices.

It also establishes a more concrete connection between token holders and the economic activities of the underlying protocol. Orest Gavryliak, Chief Legal Officer of the decentralized exchange aggregator 1inch, told Magazine:

“When projects implement buybacks and burns supported by revenue, they typically have one or two goals in mind: either to reduce the circulating supply of tokens or to demonstrate the logic of revenue generation to the market.”

Gavryliak said that telling users "we bought back and burned the tokens" is much "more straightforward" than explaining how governance works, how fees are determined, or how the protocol is used.

Why Crypto Projects Buy Back Their Own Tokens

You might wonder if it is counterproductive for a project to buy its own tokens. After all, projects usually sell tokens to raise funds to cover costs.

Almost, but there’s a key premise. Using generated revenue to buy back tokens (for holding or burning) establishes a subtle connection between the success of the protocol and the value of the tokens, which has long been a pain point for crypto projects. As Max Shannon, Senior Research Associate at Bitwise Europe, explained:

“Buybacks and burns remain an effective means of generating value for token holders: they create ongoing buying pressure for tokens in the public market, directly tying the success of the tokens to platform adoption.”

This presents a transformation for an industry that has been obsessed with pursuing narratives over the past few years, or betting on the "greater fool theory"; those buying Fartcoin or Peanut the Squirrel are not doing so based on solid economic models.

Some protocols are taking a much more aggressive approach. For example, Hyperliquid uses 99% of its revenue for buying back and burning HYPE; Pump.fun allocates 50% of its revenue for buybacks and burns, resulting in the removal of PUMP tokens valued at $446.65 million from circulation.

Image: HYPE Burns. Source: Hyperliquid

DeFi infrastructure protocol Spark presents a slightly different model: according to its co-founder and CEO Sam MacPherson, it has cumulatively bought over 143 million SPK through buybacks funded by protocol surplus in the public market.

However, these tokens have not been burned but are held in Spark's treasury to reward long-term participants in the ecosystem. MacPherson told Magazine that the focus is not merely on reducing supply:

“Token holders should participate in the long-term economic success of the protocol, rather than just receiving a payout whenever the protocol generates revenue.”

He stated that buybacks allow Spark to establish this alignment of interests while maintaining “flexibility in how and when to deploy the purchased SPK,” making the tokens economically meaningful rather than reducing them to “a simple dividend mechanism.”

Token buybacks are also an extremely tax-efficient way to return revenue to holders, as users do not have to face a heavy tax bill for dividends or rewards.

Is Buying Tokens Really the Best Use of Money?

While the aforementioned logic sounds incredibly rational, the bigger question is: is buying back one's own tokens really the best use of project funds?

It probably does not hold true in all cases. MacPherson says:

“The question should be: what is the highest value use of the next dollar of surplus?”

He suggests that if a protocol can reinvest its profits for attractive returns, it might be far more valuable than simply “distributing revenue as soon as it arrives.”

Image: PUMP Burns. Source: Pump.fun

Buybacks can support the token economy, but do not necessarily improve the underlying business.

There’s no ironclad guarantee that buybacks will translate into higher token prices. Pump.fun began large-scale buybacks and burns of PUMP since July 2025, yet the token is still down about 50% from its historical high in September 2025. The increase in UNI after Uniswap launched the UNIfication proposal in November 2025 has also seen about half of those gains returned.

Shannon points out that there are “many factors” contributing to these price movements, so they do not prove that buybacks have failed, but:

“They encourage investors to debate whether these startup projects should reduce the share of revenue committed to buybacks and burns, and reinvest more back into the team and the project itself.”

Investors should carefully differentiate between “buyback schemes that boost token prices” and “successful business models.”

A protocol that generates real surplus and is sustainable may determine that spending some money on buying tokens is the best choice; but similarly, a struggling project may just be attempting to leverage buybacks to boost prices. MacPherson bluntly states:

“Buybacks will not make an unsustainable protocol sustainable.”

When Tokens Start to Look Like Stocks

Although token buybacks superficially resemble stock buyback plans, this does not mean that tokens are becoming more and more like stocks.

Image: UNI has fallen about 50% since its buyback and burn started. Source: Coingecko

Shareholders own a part of the company and may enjoy voting rights, dividend rights, or claims on remaining assets. However, token holders typically do not have these equivalent legal rights, and Orest believes this distinction is crucial. “This is a market mechanism rather than a legally enforceable right,” he said.

MacPherson describes SPK as a "pseudo-equity" of an on-chain protocol. Although the legal ownership structure in the traditional sense does not exist, economically, Spark is “attempting to create many of the same features: participation in governance, long-term alignment, and a mechanism for those most loyal to the protocol to benefit from its success.”

When Buybacks Start to Look Like Dividends

But as crypto begins to mimic TradFi's buybacks, clouds may be gathering on the horizon because regulators are pondering what these mechanisms actually mean.

Although the 2025 “Digital Asset Market Clarity (CLARITY) Act” is still a draft and should not be viewed as established law, Gavryliak stated that its proposed framework points out a key question: where does the value of the token actually come from?

“If the value derives from the network's functionality, then the asset looks like a commodity; but if the value is based on the efforts of the project team in delivering, marketing, or providing returns to token holders, then it has become a security. Ultimately, don’t dress tokens in the garments of stocks and expect them to still be commodities.”

Ultimately, crypto investors want to know what lies beneath the token: revenue, users, a sustainable economic model, and some credible way for the token to benefit from those things.

While buybacks may offer one solution, they could also just be another form of financial engineering that makes tokens appear more valuable than they really are, without fixing underlying issues, as Gavryliak stated:

“If buybacks stop, will there still be a reason to hold this token? If the answer is no, then the problem runs deeper than the token economy.”